The p53 tumor suppressor protein is stabilized in response to cellular stress, resulting in activation of genes responsible for either cell cycle arrest or apoptosis. The cellular pathway for releasing normal cells from p53-dependent cell cycle arrest involves the Mdm2 protein. Recently, a p53-binding protein with homology to Mdm2 was identified and called MdmX. Like Mdm2, MdmX is able to bind p53 and inhibit p53 transactivation; however, the ability of MdmX to degrade p53 has yet to be examined. We report here that MdmX is capable of associating with p53 yet is unable to facilitate nuclear export or induce p53 degradation. In addition, expression of MdmX can reverse Mdm2-targeted degradation of p53 while maintaining suppression of p53 transactivation. Using a series of MdmX deletions, we have determined that there are two distinct domains of the MdmX protein that can stabilize p53 in the presence of Mdm2. One domain requires MdmX interaction with p53 and results in the retention of both proteins within the nucleus and repression of p53 transactivation. The second domain involves the MdmX ring finger and results in stabilization of p53 and an increase in p53 transactivation. The potential basis for stabilization and increased p53 transactivation by the MdmX ring finger domain is discussed. Based on these observations, we propose that the MdmX protein may function to maintain a nuclear pool of p53 protein in undamaged cells.